Carbon Tax, Subsidy, and Emission Reduction: Analysis Based on DSGE Model

Haoran Li,Wei Peng,Wei Zhang

doi:10.1155/2020/6683482

Abstract

Carbon emission has negative externalities, which will cause severe natural and social problems. In recent years, more and more attention has been paid to carbon emission reduction issue both in academic and application fields. This paper aims to explore the impact of punitive carbon tax and incentive carbon emission reduction subsidy on economy and environment through the dynamic stochastic general equilibrium (DSGE) framework. The results show that both carbon tax and carbon emission reduction subsidy policies can help to reduce carbon emissions and to improve environment quality. In addition, carbon emission reduction subsidy has a positive impact on economy, while carbon tax has the opposite impact. It follows that the incentive carbon emission reduction policy is more conducive to the coordinated development of economy and environment. This research can be a guideline for the government to formulate carbon emission abatement policies from the perspective of coordinated development.

Highlights

With the continuous increase in production scale and carbon emission, the world is facing more and more severe environment problems such as air pollution and climate change
Complexity contributions lie in that as follows: (1) An environmental dynamic stochastic general equilibrium (DSGE) model is built to analyze the impact of carbon tax and carbon emission reduction subsidy on the economy and environment, which supplements the relevant literature of environmental DSGE modeling. (2) e results demonstrate that both the punitive carbon tax and incentive carbon emission reduction subsidy can reduce carbon emissions and promote the environment quality. (3) e difference between two carbon emission reduction policies is that carbon emission reduction subsidy is beneficial to both environment improvement and economy development, while carbon tax is only beneficial to the former, which indicates that incentive policy is more conducive to the coordinated development of economy and environment
[18] applied a dynamic computable general equilibrium framework to study the Chinese carbon emission reduction strategy choice, and the results showed that the carbon tax is more effective than carbon trading

Summary

Haoran Li and Wei Peng

College of Economics and Management, Shandong University of Science and Technology, Qingdao 266590, China. Is paper aims to explore the impact of punitive carbon tax and incentive carbon emission reduction subsidy on economy and environment through the dynamic stochastic general equilibrium (DSGE) framework. E results show that both carbon tax and carbon emission reduction subsidy policies can help to reduce carbon emissions and to improve environment quality. Carbon emission reduction subsidy has a positive impact on economy, while carbon tax has the opposite impact. It follows that the incentive carbon emission reduction policy is more conducive to the coordinated development of economy and environment. Is research can be a guideline for the government to formulate carbon emission abatement policies from the perspective of coordinated development It follows that the incentive carbon emission reduction policy is more conducive to the coordinated development of economy and environment. is research can be a guideline for the government to formulate carbon emission abatement policies from the perspective of coordinated development

Introduction

Literature Review

Environment Sector

Green production factor input St